Answers to Problems in Textbook
1.
a.
Gross domestic product (GDP) equals consumption expenditures plus private domestic
investment plus government purchases of goods and services plus net exports. To compute
GDP, we first need to compute private domestic investment and net exports. The information
given allows us to calculate private domestic investment by adding net fixed investment plus
depreciation plus the change in inventory. Therefore, private domestic investment equals
688.2
+
990.8
+
56.5
=
1735.5. Net exports equal exports minus imports, so that net exports
equal 1,096.3

1,475.8
=

379.5. Therefore, gross domestic product equals 6,739.4
+
1,735.5
+
1,721.6
+
(

379.5)
=
9,817.0.
b. Gross national product equals gross domestic product plus receipts of factor income from the rest
of the world minus payment of factor income to the rest of the world. Therefore, gross national
product equals 9,817.0
+
382.7

343.7
=
9,856.0.
c. Net domestic product equals gross domestic product minus depreciation. Therefore, net domestic
product equals 9,817.0

990.8
=
8,826.2.
d. Domestic income equals net domestic income minus indirect business taxes. Therefore, domestic
income equals 8,826.2

664.6
=
8,161.6.
e. Personal income equals domestic income minus undistributed corporate profits minus corporate
income taxes minus social security contributions plus government transfer and interest payments.
Therefore, personal income equals 8,161.6

130.3

265.2

702.7
+
1,366.3
=
8,429.7.
f.
Disposable personal income equals personal income minus personal taxes. Therefore, disposable
personal income equals 8,429.7 – 1,235.7
=
7,194.0.
g. Personal saving equals disposable personal income minus consumption expenditures minus
personal interest payments. Therefore, personal saving equal 7,194.0

6.739.4

286.2
=
168.4.
2.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Spring '11
 Staff
 gross domestic product, Orange Juice

Click to edit the document details